NAFTA Renegotiation Process Begins

The Trump administration has officially laid out its strategies to renegotiate the North American Free Trade Agreement with Canada and Mexico in a letter delivered today to Congress. The administration’s main goal is to update the Clinton-era trade deal. U.S. Trade Representative Robert Lighthizer recently wrapped up two days of meetings with both the Senate Finance and House Ways and Means Committees, as well as special trade advisory groups from both chambers.

By law, those meetings had to take place before the letter could be sent. The letter was addressed to Chuck Schumer, Orrin Hatch, Paul Ryan, and Nancy Pelosi. In the letter, Lighthizer stressed the need to modernize the agreement. “As I said three days ago when I was sworn in, I believe the President’s leadership on trade will permanently reverse the dangerous trajectory of American trade,” he said. Lighthizer singled out digital trade, which was in its infancy when the original agreement was negotiated, as one of the details needing to be upgraded.
Lighthizer added that the administration intends to begin negotiations as soon as possible, but no sooner than 90 days from now.

In his campaign for the White House, Donald Trump stressed the dangers of consistently running a trade deficit. The administration will likely focus on ways to cut into the trade deficit when renegotiations formally begin on the NAFTA. One key point that Trump wants to revise is the “Rules of Origin.” Trump believes too many parts used to assemble goods in NAFTA countries are supplied by non-NAFTA nations. When those goods are assembled, they come into the U.S. tax-free.

Government contracts are another key topic for the administration. NAFTA requires the three governments to consider suppliers from other countries when it comes to infrastructure projects. That means the U.S. government must look at Mexican and Canadian suppliers as favorably as it does with American suppliers. However, Trump wants the U.S. government to favor American suppliers, and experts worry that could lead to retaliation by Mexico and Canada. American suppliers would have a much harder time getting contracts with Mexico and Canada.

Dispute resolution is another item of concern. Current NAFTA rules say disputes should be heard by a panel of members from all three countries. Trump believes cases involving American businesses should be heard in American courts. He believes American businesses don’t always get a fair shake in dispute resolution.Source: NAFB News Service